EU: Food manufacturers looking forward to post-quota sugar market

Published: 10/05/2017, 5:28:49 PM

As of October 1, the EU's historic sugar regime is no more, according to the UK's Food Navigator.

The abolition brings to an end production caps on sugar beet, which was limited to 13.5 million tonnes, and guaranteed minimum prices to farmers that have existed since 1968 as part of the Common Agricultural Policy (CAP). Europe, which has until now had to import sugar to meet its needs, will export around the world.

"Producers will now be able to adjust their production to real commercial opportunities, notably in exploring new export markets," ​the European Commission said. "It also means fewer administrative burden for operators, growers and traders."​

Isoglucose (high fructose corn syrup) was capped at 0.72 million tonnes while inulin syrup had a production quota of zero, meaning industry was effectively banned from making it. "The end of quotas therefore provides new opportunities [for inulin syrup] if the market is there," ​said the Commission.

CIUS, the association of European Sugar Users whose members include confectionery and biscuit manufacturers, welcomed the end to what it called the "market-distorting​" quotas.

"They have for too long, hampered the competitiveness of the European sugar-using food and drink industries. Sugar users seek security of supply from competitive and sustainable production and refining of beet and cane sugar in the EU," ​it said.

Its president Robert Guichard said manufacturers would now be able to access "sustainable supplies​" of sugar.

Plentiful supplies of cheap sugar will almost certainly result. Market research firm Stratégie Grains predicts production of white sugar will rise by almost one third (31%) over the next four years, with prices dropping accordingly

Europe is the world's biggest producer of beet sugar, accounting for around half of global production. Most of the world's sugar comes from cane, however, and beet only represents around 20%. The end of the quotas will mean more sugar from beet.

The next beet harvest will be around 20% bigger across the bloc, rising to 20.1 million tonnes, according to Commission estimates, as farmers devote more land to beet and benefit from recent favourable weather.

Ingredient suppliers have also been preparing to ramp up production in expectation of the end. Last year Cargill announced a ​EUR35 million (US$40.1 million) investment​ in​ expanding its sweetener options throughout Europe ahead of the end of the quotas, while ADM acquired major production facilities in Turkey and Bulgaria and Tereos bought UK refiner Napier Brown​ citing the same reason.

But after being so heavily regulated for so long, liberalisation could bring problems. When milk quotas were lifted in 2015, many dairy producers across the EU were forced out of business as prices plummeted.

Keen to avoid a repeat of this, the European Commission invested €5.4 billion in the sugar sector between 2006 and 2010 so it could "carefully prepare for this moment".​

It set up the Sugar Market Observatory​ which gives farmers short-term analysis and statistics about the sugar market, and it will also keep in place various measures from the Common Agricultural Policy (CAP) to cushion the blow of potential market disturbances. These include "substantial​" import tariffs for cane sugar, private storage facilities and farmer income support.

While these support measures are surely a relief for beet farmers, the CIUS opposes the restrictions on sugar cane. It argues that food and drink makers need direct access to alternative sources of sugar in case of beet supply shortages.

It is also a very bitter pill to swallow for sugar cane processers.

While cane sugar grown in European overseas departments such as French Reunion Island or Martinique will not be affected, European refiners that import the raw material from producer countries will continue to be hard hit, as was already the case under the 1968 - 2017 regime.

"We are still very heavily constrained. Simply because there are more beet sugar producers than cane refiners, we could never get a fair deal when the regulations were discussed. It's very disappointing and that's why we look forward to the UK having control over its own sugar and trade policy."​

Tate & Lyle Sugars was a vocal campaigner in favour of Brexit​ ahead of the referendum, even sending an open letter to its workforce pushing for a yes vote.

But UK policymakers were always in favour of a regulatory environment in which cane and beet producers were treated equally, Mason said, and Tate & Lyle expects this will continue to be the case after the UK leaves the EU.

Cane processors are not the only stakeholders who believe Brexit offers some light at the end of the tunnel.

For public health campaigner and emeritus professor of nutrition policy at London Metropolitan University Jack Winkler, the end of the sugar regime is "the worst possible policy at the worst possible time".​

"Abolition will lead to more sugar at lower prices," ​said Winkler, "and this comes right in middle of an obesity epidemic. We need less sugar but at higher prices. That means not abolishing quotas but bringing them back."​

The Commission has played down concerns for Europeans' health: "EU sugar consumption is expected to remain stable or slightly decline [...] as much of the increase in output will either compensate for decreasing imports or help to boost export sales,"​ it said.

But Winkler is dubious that manufacturers - even those with the best reformulation intentions - will be able to resist the temptation of cheap sugar as a filler ingredient.

Brexit, therefore, could offer a silver lining in allowing the UK government to develop a post-Brexit sugar policy that both benefits farmers and protects public health, he said.

Together with Tam Fry, head of the Obesity Coalition, Winkler has been campaigning the UK government to reinstate a support price for beet farmers at "a very high level, more than has existed at present or in the past​" along with beet production quotas that are just enough to cover domestic demand.

They also want import controls to stop big cane-producing countries like Brazil and Thailand selling cheap cane sugar to manufacturers.

Winkler and Fry recognise that, in this scenario, "the losers would be manufacturers, paying more for ingredients. But they are already committed to sugar reduction. Higher prices would give them economic, as well as moral, incentives to use less."

Nor would it likely be a popular policy for cane processors, who want to be placed on a level playing field with beet producers. Mason said: "From a heavily regulated system to a completely free market, we can cope in any of those scenarios - as long as cane and beet are treated equally."​